MNI China Press Digest: Wednesday, Dec. 27

     BEIJING (MNI) - The following are highlights from the China press for

Wednesday, Dec. 27: 

     China's financial regulation will focus on three risks: the debt of

state-owned enterprises (SOEs), local government debt and the wealth management

sector, the Economic Information Daily said in a front-page commentary on

Wednesday. As an effective method for deleveraging the SOEs, debt-to-equity

swaps will grow rapidly next year. A slower increase of local government debt

will constrain infrastructure investment, which in turn will drag down demand

for raw materials. Under stricter regulation, the scale of wealth management

products will shrink noticeably. However, regulators have reiterated that they

will pace their efforts to maintain stability, the commentary said. (Economic

Information Daily)

     The deterioration in corporate bond issuance in China has sharply increased

this year in a market made sluggish by strict regulation and tight liquidity

conditions, the Shanghai Securities News reported Wednesday. As of the end of

November, 734 corporate bond issues had failed or were canceled, affecting

CNY586.63 billion worth of bonds, compared with CNY577.53 billion for all of

last year. In November alone, CNY85.23 billion worth of bonds were canceled or

postponed, 2.6 times more than in the same period last year. Issuers and buyers

of corporate bonds are both reluctant to do business, with a capital shortage

pushing up bond rates. The situation is expected to continue next year as

liquidity conditions tighten further. (Shanghai Securities News)

     Rates for negotiable certificates of deposit (NCDs) have surged to a record

high this week, the China Securities Journal reported Wednesday. Banks have been

under pressure from year-end liquidity assessments, and a large amount of NCDs,

used in the interbank market, are maturing. On Tuesday, the range of rates for

one-month NCDs issued by AAA-ranked joint-stock banks rose to a historic high to

5.2% to 5.5%; for three-month NCDs, the rate range was 5% to 5.3%. A total of

CNY2.2 trillion worth of NCDs mature in December, which means banks need to roll

over the instruments to meet liquidity coverage ratio requirements. An

unexpectedly fast increase in NCD rates began in the middle of September even

though regulators had discouraged the rapid expansion of interbank transactions.

(China Securities Journal)

     Chinese real estate companies, under pressure from strict regulation, are

intensively selling off assets to get recoup capital and strip away poorly

performing holdings, the Shanghai Securities News reported Wednesday. Property

market controls are deepening, causing transaction volume to drop, and fund

raising for real estate companies has been tightly restricted, so developers are

scrambling to cut debt. In November, 11 real estate companies, including 9 that

are state-owned, sold a total of CNY56 billion in assets. The assets were mainly

out of line with the companies' strategies or were in remote or lower-tier

cities. (Shanghai Securities News)

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: rich.dirks@marketnews.com

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